MoP Updates Electricity Rules to Expand ESS Operations, Ownership, and Market Access

After issuing the draft amendment in June 2025, the Ministry of Power (MoP) has introduced an update to the Electricity Rules, 2005.

The latest amendment builds on the draft and gives clarity on the legal status of Energy Storage Systems (ESS) by defining their role in energy projects and allowing consumers to become legitimate owners. The rule provides ESS with legal market access and adds sub-rules permitting them to be developed, owned, leased, or operated by a wide range of entities. ESS projects can now be fully integrated into the following project, thereby giving these entities greater market access.

These entities are:

• Generating Companies (Gencos)

• Transmission & Distribution Licensees (Transcos/Discoms)

• Consumers (including C&I)

• System Operators

• Independent Energy Storage Service Providers (a crucial new category)

ESS To Reap Benefits as A Separate Entity 

The guidelines provide ESS with a clear legal status, making them beneficial when co-located with a power plant or operating as a separate grid element. They also establish rules for scheduling, dispatch, and market participation. ESS can now be owned and operated by, and co-located with, a generating station, transmission licensee, distribution licensee, or consumer, with these beneficiaries having the same legal status as the owner.

The MoP regulation states, "Provided that if such an Energy Storage System is not co-located with, but owned and operated by, the generating station, distribution licensee, or consumer, the legal status shall still be that of the owner. For the purpose of scheduling, dispatch, and other matters, it shall be treated at par with a separate storage element."

Enabling DISCOMs to Leverage ESS

The regulation allows Distribution Companies (DISCOMs) to use ESS to manage peak loads more effectively, reduce power purchase costs, and improve reliability for end consumers. It also creates opportunities for domestic and international investors by providing clear rules on ownership, market access, and commercial models.

The amendment adds, "Developer or owner of the Energy Storage System now also has the option to sell, lease, or rent out the storage capacity, in whole or in part, to any consumer or utility engaged in generation, transmission, or distribution, or to a Load Despatch Centre, or any other person."